The City of Florence is one step closer to soliciting bids for a non-exclusive electric franchise for electricity infrastructure work inside the city’s transportation rights-of-way.
In August, the Florence City Council discussed the electric franchise agreement and at its Sept. 16 special meeting, the council had its first reading of an ordinance to advertise the bidding.
“In the City of Florence, there’s two major electric utilities, Duke Energy and Owen Electric,” City Administrator Joshua Hunt told LINK nky ahead of the special meeting. “Duke and Owen Electric will respond and from there, that contract will go back before Council, and then they’ll ultimately make the decision if they want to enter into that franchise with those two utility companies.”
If approved, the agreement would be for 20-year terms. The ordinance covers the placement of facilities by electric utilities for the transmission, distribution and sale of electricity within public rights-of-way and it authorizes the city to impose a franchise fee of up to 5% of a company’s annual gross receipts from the sale of electricity to customers.
Though utilities typically pass along those fees to customers, Hunt doesn’t see Florence residents paying more for their power in the near term with new franchise agreements.
So what is a franchise fee?
“A lot of cities in Northern Kentucky impose electric franchise fees,” Hunt says. “Think of it kind of like a land lease. The utility company is using your property to run their utilities, and there’s an additional cost that comes from that, specifically with the city, because we’re a full-service city that has our own utilities that a lot of times are within that same right of way.”
The new law includes the franchise fee language because it’s impossible to forecast events that could arise during the 20 years that the franchise agreement is in effect.
“What the ordinance does is it allows, in the future, if the council wanted to impose a franchise fee of up to 5%, the council at that time could have deliberations, discuss, and impose it at a later point,” Hunt said.
If approved at the next regular business meeting, the ordinance creates a legal framework for moving forward.
“The next step, if this is passed, will be that it goes to bid,” Hunt told council members. “We have 30 days from the bid response to bring that back before this council, where you will either accept it or deny it.”
Before voting unanimously to move the ordinance forward, councilmember Patricia Wingo noted that the city has other franchise agreements.
“This isn’t something that’s brand new,” she said. “It’s something that has almost become a housekeeping measure so that we can continue to maintain control of those issues that we have oversight on with the electric companies.”